Stress-testing the punishment solution: sanctions and performance in public-good games

In economic theory, a public-good game is an abstract descriptionof a class of situations in which the individual pursuit of one¿sprivate interest by all actors leads to an outcome leaving everyoneworse off than had they cooperated. While the game is atheoretic construct, the class of situation it describes is very real,in the sense that there is an abundant number of instances in everydaylife displaying the characteristics of a public-good game.Examples can be found at every level from the small-groupproblem of doing the dishes in a shared at over the communitylevelquestion of who volunteers to take on an honorary office,to the grand scale, when it comes to the exertion of effort toreduce global warming by reducing one¿s energy usage and litterproduction.What are the main lessons to be learnt from this dissertation?First and foremost, punishment mechanisms are a double-edgedsword. However, when carefully designed, they can enhancecooperation and eciency. This feature of punishment mechanismsis furthermore robust to a number of perturbations. Neitherthe introduction of dynamics, retaliation and counter-retaliation,nor competing other institutions will change this. However, theworking mechanism - and thus, the precise conditions underwhich the mechanism will be effective - is still far from clearlyunderstood. von Wolff, Irenaeus